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Monday, June 6, 2011

Do you know this guy?

We all know that those of us who sell gold think it's a great buy. And even a bunch of cartoonish television commentators like Larry Kudlow have jumped on the bandwagon.

Similarly we all know that money managers at the big shill firms like Merril Lynch are desperately trying to keep the clients out of gold and in debt and equities - because that's where they get their kickbacks.

But what about those who reached the pinnacle of the investment structure but have since left to start their own advisory firms? Those bright enough, and experienced enough to understand the vast interconnected financial structure, but no longer need to espouse any particular corporate line?

Guys who will never make it to your television screen.

Kenneth Courtis (pictured above) ran Goldman Sachs Asia, until recently, when he opened up his own Hong Kong based investment firm. In a recent interview he summed up his view on gold and debt thusly:

Kenneth Courtis (former vice-chairman, Goldman Sachs (Asia) and co-founder of Themes Investment Management): Some investors increasingly see gold as a “currency”. The popping of what I call the “Bush Bubble” took the world economy to the edge of a vast catastrophe and it also effectively smashed the global economic and financial equilibrium which had been in place since the Bretton Woods system finally imploded four decades ago. We do not know today what the new equilibrium will be. What we do know is the mushrooming of debt was not only central to the US bubble; it is also one of the dominant characteristics of the Japanese and many European economies. Even then, with the exception of Japan and a few others, public sector debt is a small part of the “Himalaya” of debt bearing down on the world economy. Vastly more problematic for most developed economies is private sector debt – particularly in the banking and household sectors. Private sector debt is above 300 per cent of GDP in many OECD economies. Many investors looking at this situation rationally conclude that the probability of debt of this magnitude being paid back, dollar-for-dollar, is extremely low. The logical conclusion is to invest in hard assets, which will hold their value as paper assets are devalued through inflation. As this process unfolds, there will be an increasing clamour for gold to play a new role in the world monetary system. I would see then gold playing a reference role rather than an anchor to a new global monetary system.

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